Dow falls more than 300 Points as Dollar Soars
Sellers woke up from the weekend and hit the market hard today with volume soaring along with the US Dollar. The Dow Jones Industrial average fell more than 300 points leading all indexes lower with the Russell 2000 holding up the best. Biotech stocks held up relatively well despite the selling in the broader market. Clearly many traders are worried over a stronger dollar and what it will do to inflation. A stronger dollar will certainly make things appear cheaper as commodities are priced in dollars. Europeans will be feeling the pinch as their monetary body is determined to create inflation by printing Euros. Today was not a good session for the market, but we have approached short-term oversold signals where the market has the potential to bounce. Other than the NYSE Composite index (Sell Signal) we have moved into Neutral mode and will operate as such.
Currencies always have a way of creating a crisis in the market. Whether or not we have another situation where the Euro or Yen or both cause a problem remains to be seen. However, the drop in the Euro is something to see. The Yen has been weak for some time as the country continues to prove giving free cash to banking institutions lack the necessary fire power to spark an economy. Regardless, the EURUSD clearly shows the Euro weakness and is in large part responsible for the massive gains in the US Dollar. Check out the chart.
It was nice to see Biotech stocks outperform today despite the overall selling. The relative out-performance speaks volumes for what the market thinks of the group. If we do get a bounce Biotech stocks should be leading the pack. Whether or not this leads us to new market highs remains to be seen. After yesterday’s bounce this market was in position to resume its march to more new highs. Unfortunately, with this type of selling the likelihood of us returning to highs is questionable. Again, we follow price and at the moment we are seeing weakness.
How many times have we seen this story? How many times has the market looked like it was about to crater only to see it hit new highs? Quite a lot, but is this time any different? We do not have a QE program in the US and if the Federal Reserve begins to raise rates then we are in a new world. A lot things are up in the air and if we solely focus on price whatever plays out will not matter to us. Price will always lead prior to any event and ignoring the direction will only leave gains on the table.
We are now in neutral mode as the NYSE Composite in sell mode. Energy and Financials are hurting are not great signs for this market. Biotech stocks showed out-performance, but given the overall weakness we have shifted into neutral mode. Let’s see how this plays out.
More here:
Dow falls more than 300 Points as Dollar Soars
See which stocks are being affected by Social Media
